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Bharath Chandrashekhar
Hui Li
Rodrigo Serna
Presented March 11, 2014
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Current Holdings – Current Holdings of AL
Relevant Macroeconomic Trends
Industry Structure Analysis
Company Overview
Financial Analysis
Projections/Assumptions
Valuation
Recommendation
2
ZIXI, 5.32%
WAG, 11.63%
ABBV, 11.87%
ABT, 9.13%
UNP, 10.82%
AEO, 12.44%
SNA, 6.59%
PETM, 3.96%
AL, 8.48%
LF, 8.80%
COF, 4.33%
JKHY, 6.63%
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400 shares of AL purchased on 12/18/12
@ 22.32
Closed @ 37.09 on 3/10/14
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+ Global Airline Market
+ Global GDP Growth
+ European & Asian Markets
+ Budget Airlines
+ Increase in % of Global Fleet Leased
- Emerging Markets
+/- Consolidation
of Industry
Source: CIT Aerospace Aircraft Leasing Industry Overview (p26, p29)
Caption: Percentage of Fleets Leased in Geographic Areas
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Bargaining Power
of Buyers
Bargaining Power
of Suppliers
MEDIUM
HIGH
Industry Landscape
/Competition
MEDIUM
Threat of New
Entrants
Threat of
Substitutes
LOW
LOW
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Financing
Airlines
Air Lease
Boeing
Airbus
7
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Source: AL 2013 10K P45
Unsecured Debt (70% of Total Debt): Flexibility
BBB- from S&P, Aug 2013
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Fleet Size
Weighted average age
Weighted average remaining lease term
Source: AL 2013 10K P46
12/31/2011 12/31/2012 12/31/2013
102
155
193
3.6
3.5
3.7
6.6
6.8
7.1
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Source: AL 2013 10K P5-6
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Strengths
 Management Team
 Low Composite Interest Rate
 Young Fleet Portfolio
Opportunities
 Economic Recovery
 Companies in emerging markets are in
need of leased aircraft
Weaknesses
 Fixed Rental Income vs. Floated
Interest Payment
 High supplier concentration for
commercial aircraft
Threats
 Lawsuit: The “AIG/ILFC Complaint” to
Cross Complaint
 Emerging Markets
 Rising Interest Rate
11
2010
Revenues
Rental of flight equipment
Interest and other
Total revenues
Revenue Growth
Expenses
Interest
Amortization of discounts and deferred debt issue costs
Extinguishment of debt
Amortization of convertible debt discounts
Interest expense
% of Revenue
Depreciation of flight equipment
Selling, general and administrative
Stock-based compensation
Total expenses
Income (loss) before taxes
Income tax (expense) benefit
Net income (loss)
% Profit Margin
2011
2012
2013
$57,075
1,291
58,366
$332,719
4,022
336,741
476.95%
$645,853
9,893
655,746
94.73%
$836,516
22,159
858,675
30.95%
11,062
4,883
35,798
51,743
90.66%
44,862
9,481
3,349
57,692
17.34%
130,419
16,994
147,413
22.82%
168,743
23,627
192,370
23.00%
19,262
24,232
24,044
119,281
(60,915)
8,875
(52,040)
-
112,307
44,559
39,342
253,900
82,841
(29,609)
53,232
15.8%
216,219
56,453
31,688
451,773
203,973
(72,054)
131,919
20.1%
280,037
71,212
21,614
565,233
293,442
(103,031)
190,411
22.2%
12
2014
Fleet Size
% Growth
Income Statement
Revenue from rental of flight equipment
Revenue from interest and other
Interest Expense
Depreciation of flight equipment
Selling, general and administrative
Stock-based compensation
Net Income
% Growth
$ of Revenue from rental of flight equipment / Plane
% Growth
$ of Revenue from interest and other / Plane
% Growth
$ of Interest Expense / Plane
% Growth
$ Depreciation of flight equipment / Plane
% Growth
$ Selling, general and administrative / Total revenue
$ Stock-based compensation / Plane
Balance Sheet
Total shareholders' equity
% Growth
228
28.3%
2015
263
15.4%
2016
283
7.6%
2017
307
8.5%
2018
338
10.1%
$1,094,459 $1,287,718 $1,413,356 $1,563,881 $1,756,233
31,266
39,672
46,958
56,034
64,776
249,221
290,353
315,557
345,742
384,460
359,563
415,174
447,192
485,602
535,171
90,058
106,191
116,825
129,593
145,681
16,886
19,911
21,905
24,299
27,315
$266,499
$322,245
$363,242
$412,542
$473,448
40.0%
20.9%
12.7%
13.6%
14.8%
$4,800
2.0%
137
10%
1,093
1.0%
$1,577
0.1%
8.0%
1.5%
$4,896
2.0%
151
10%
1,104
1.0%
$1,579
0.1%
8.0%
1.5%
$4,994
2.0%
166
10%
1,115
1.0%
$1,580
0.1%
8.0%
1.5%
$5,094
2.0%
183
10%
1,126
1.0%
$1,582
0.1%
8.0%
1.5%
$5,196
2.0%
192
5%
1,137
1.0%
$1,583
0.1%
8.0%
1.5%
2,730,356
8.2%
2,954,245
8.2%
3,196,493
8.2%
3,458,605
8.2%
3,742,211
8.2%
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General
Company
Ticker
Return on Investment
FYE
ROIC
(%)
ROE
(%)
ROA
(%)
Implied
Div. Yield
(%)
LTM Leverage Ratios
Debt /
Debt /
Net Debt /
Tot. Cap.
EBITDA
EBITDA
(%)
(x)
(x)
Air Lease Corp
AL
Dec-31
3.62%
7.55%
2.04%
1.32%
69.88%
10.2x
9.7x
AerCap Holdings
FLY Leasing Limited
Aircastle LTD
AER
FLY
AYR
Dec-31
Dec-31
Dec-31
3.80%
2.02%
0.82%
12.04%
8.48%
1.81%
3.10%
1.52%
0.48%
1.13%
3.05%
16.24%
72.27%
79.41%
69.43%
9.6x
11.4x
11.5x
9.2x
10.5x
9.5x
Mean
Median
2.21%
2.02%
7.44%
8.48%
1.70%
1.52%
6.81%
3.05%
73.70%
72.27%
10.83
11.40
9.73
9.50
High
Low
3.80%
0.82%
12.04%
1.81%
3.10%
0.48%
16.24%
1.13%
79.41%
69.43%
11.5x
9.6x
10.5x
9.2x
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Terminal Value
Equity Cash Flow
Present Value of Total Equity
Shares Outstanding
Implied Share Price
Discount Rate
Terminal Growth Rate
Discount Rate
Growth Rate of Shareholders' Equity
$45.68
10.9%
11.9%
12.9%
13.9%
14.9%
1.5%
52.44
47.62
43.44
40.13
37.14
Terminal Growth Rate
2.0%
2.5%
3.0%
54.16
56.08
58.24
48.97
50.46
52.12
44.51
45.68
46.97
41.00
41.96
42.99
37.86
38.64
39.49
2015
322,245
(223,308)
2,953,163
2016
363,242
(241,575)
3,194,738
2017
412,542
(261,336)
3,456,074
2018
473,448
(282,714)
3,738,788
60,077
98,937
121,667
151,206
4,649,523
8,579,046
4,977,471
108,963,550
45.68
2.5%
12.9%
8.2%
3.5%
60.70
53.97
48.39
44.13
40.41
Discount Rate
Net Income
Minus Increase in Shareholders' Equity
Ending Shareholders' Equity
2014
266,499
(206,422)
2,729,856
Growth of Shareholders' Equity
45.68 6.2%
7.2%
8.2%
9.2%
10.2%
10.9%
56.46
56.27
56.08
55.88
55.67
11.9%
50.86
50.66
50.46
50.25
50.04
12.9%
46.10
45.89
45.68
45.46
45.24
13.9%
42.39
42.17
41.96
41.73
41.49
14.9%
39.09
38.87
38.64
38.40
38.16
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HOLD
400 Shares
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